„There is no way to make money with the wallet itself.“

Mycelium is one of the most popular Bitcoin wallets since 2013. We spoke with product manager Dimitrij (known as Rassah) about the history of Mycelium, the challenges in wallet development and the plan for an upcoming big release.

Hello Dimitrij. Tell me something about you and your team!

We are an international team. A lot of people are in Europe, for example in Austria or Denmark, and some in Canada and the US. We have no central office and are just connected online.

When was Mycelium founded?

In some way Mycelium was a chield of the arab spring. People used twitter and other social media to organize the protest, and the government stopped the internet to stop the protest. The original idea of Mycelium was to build a device that sets up a mesh network. This is something like twitter, but without internet connection. This was in 2008.

Than came Bitcon. We had the idea to use Bitcoin on the device and started to develop it. We build a wallet, developed our brand, and made the Mycelium you know. This was in 2013.

What are the challenges in developing wallets?

First challenge is, it should be completely secure, so that people should not loose their money. Another challenge ist the slow internet connection of smart phones. SPV (Simple Payment Verification) was available, but still difficult for smartphones, because you have to download all the blockheaders and that requires a lot of processing power. Using this in 2013 was not possible, because you had to wait some minutes after starting. So we created a backend server structure: the wallet asks the server for the balance. This is not decentralized as SPV nodes are, but it’s faster and the private keys are still stored on the phone.

How can you earn money with a wallet? It seems that this is a problem.

Our CEO and founder has other sources of income he uses to fund our work. He hopes that we will earn money, when we are established. With entropy, a small USB device that uses hardware based entropy to create paper wallets, we earned some money. We have a well recognized brand and now we try to monetize our brand.

I think the financing of wallet development is a general problem. There is no way to make money with the wallet itself. There is the idea to charge for transactions, but than people leave and use other wallets. The only way to earn money with wallets is to provide a service on top of it. Coinbase and circle for example sell bitcoins, ledger or trezor sell hardware. We made some money by integration third party services, like cashila, and with local trader we earn a small income with fees.

What makes Mycelium special compared to other wallets?

Mycelium is made for advanced users. There are a lot of of Bitcoin wallets, and some are simple – you have an acount, and you can send and receive money. With Mycelium you have different types of accounts and we support third-party-services, like trezor. We also allow to build a paper wallet and to sign a message with your key. One of our top priority is privacy, we support HD addresses and TOR.

Recently you announced a big new release at the end of the year. Can you tell me something about your plans?

The idea of Mycelium is to bundle multiple services in the wallet. The way the wallet is designed, we are the only ones who can add features. Any time a third-party wants to have their service added, they have to come to us and we have to make it. This takes much time from our developers. The new wallet will be designed more modular: Third parties can use our APIs and build plugins by themself, and users can add the plugin they wish to use.

With the next major release Mycelium will become a multi-tool.

The same we make with Bitcoin itself. By now we use a specific bitcoin code we wrote ourself. That makes it difficult to switch to another blockchain. But we make bitcoin modular itself, as a plugin, so we can add other blockchains, another currencies, and another protocols like colored coins and so on. This allows us to concentrate on the security and focus on bitcoin specific improvements. For example we plan to support coin-shuffle and stealth adresses to enhance privacy, or multi-sig for security. It’s a lot of work to do, but by now we don’t have the time to do.

Another big announcement was the crowdsale of shares in Mycelium. Can you explain this?

The wallet will be a separate entity and decoupled from the rest of our company. We are selling 5 percent of the wallet division. It’s something like stock, but just a contract. You can buy and sell the tokens, and if there is going to be a profit or the company’s value raises, then the worth of the share will raise too. If this happens, the share will be converted to something that pays out dividend.

We build the token on colored coins. Anybody can trade them and prove he is the owner. You need the colu-wallet to save them now, but we are working on adding colored coins to Mycelium. It’s possible to print a private key for your asset.

Do you work on integrating Segregated Witness and RBF?

We are working on Segregated Witness for a few month. It’s not done yet, it’s a very complicated project. RBF will be shortly afterwards. For Segregated Witness you’ll need to have a special account, it uses another address format. Both accounts will be compatible. If you send from an account, that is not compatible to Segregated Witness, the new account will be able to receive it as a standard transaction and be able to build a Segregated Witness transaction.

3 Comments on „There is no way to make money with the wallet itself.“

Well, now that they have admitted themselves there’s no money to be made by the wallet, why would anyone fund their crowdsale to by 5% of the wallet side of the business? That doesn’t make any sense?!?

the headline was just poorly chosen, it was more meant like you can’t charge people for letting them send their own money, the important part is “The only way to earn money with wallets is to provide a service on top of it.”

Local Bitcoin wallets now have some free bits given after verifying your account and thru referrals that signs up under you and verifying their accounts as well. Rebates can also make you earn bitcoins from wallet funds usage either paying your bills, cashing out etc.